Is our knowledge sufficient? Linking internal auditors’ knowledge to public expenditure management through internal audit effectiveness in local government authorities

Abstract

Weak public expenditure management remains a persistent challenge in developing economies, undermining service delivery and fiscal sustainability, especially in local government authorities. This study examines the direct and indirect influence of internal auditors’ knowledge on public expenditure management through the mediating role of internal audit effectiveness in local government authorities. This study adopts the resource-based view (RBV) as the single overarching theoretical framework. Drawing on data from a cross-sectional survey of 49 internal audit professionals in local government authorities, structured questionnaires were distributed to collect data in the selected LGAs. For testing the study’s hypotheses, PLS-SEM in Smart PLS 4 was employed.revealing that internal auditors’ knowledge significantly predicts internal audit effectiveness (β = 0.610, f² = 0.593) and public expenditure management (β = 0.522, f² = 0.521). Internal audit effectiveness also mediates this relationship (β = 0.238, p = 0.011). The model explained 67.2% of variation in public expenditure management (R² = 0.672) and 37.2% in internal audit effectiveness (R² = 0.372), demonstrating strong reliability and predictive relevance. Results concluded that internal auditors’ knowledge is a positive and significant factor in improving public expenditure management and internal audit effectiveness. Also, internal audit effectiveness has a positive and significant direct effect on public expenditure management and partially mediates the relationship between internal auditors’ knowledge and public expenditure management. This study makes a timely contribution to public sector governance and auditing literature, especially in under-researched Sub-Saharan African contexts. This study recommends that there is urgent need for targeted capacity-building programmes to strengthen internal auditors’ expertise in financial management, alongside investments in audit quality, information access, and resource allocation.